I deposited USD in coinbase.com and bought some BTC, which shows in my wallet in coinbase.com. But when I search my address in blockchain.info, I saw no transaction associated with my address. I bought this about 2 month ago so it's not about delay of the transaction to blockchain. Is coinbase.com lying about my transaction? If it's not in blockchain, how can I claim that I own those bitcoin? My addresses are "1KqS8GcH9qpT9sHDuv1JXgTicCPQfBdZho", "1HMP3S6jWWnXc6nJNqPnCB3g9xMPk3iyF2" and "1A5Ttr8pfsmYFLavPjkCoKKUwoMSxbEFNV".

This is why you never want to keep your bitcoins at the exchange. Always withdraw your bitcoins in your wallet, you never know what can happen, tomorrow they can get hacked and you'll lose all of your money.
– nacholibreAug 31 '17 at 7:54

1 Answer
1

Trades within exchanges do not occur on the blockchain. That would severely bloat the blockchain and produce a lot of unnecessary transactions. These trades are simply done by updating your account's balance within the service's internal database. You are not actually sent Bitcoin and there is no way to prove that you own that much Bitcoin except by showing your account.

The addresses that an exchange gives you are not your addresses. They are addresses to the exchanges wallet and once you send Bitcoin to that address, they will update your account's balance in their internal database system. The exchange is holding your Bitcoin for you, and they can do whatever they want with it. It isn't really yours until you choose to withdraw the Bitcoin. When you withdraw, you likely won't be sent Bitcoin from "your" addresses either, but rather from other addresses in the exchange's wallet and often times your withdrawal will be part of the same transaction as other people's withdrawals.

Interesting. I'm doing this first time and found this really suspicious. Basically it means exchanges are not trading actual coins and simply holding my cash. They can even use it to invest other stuff and generate additional income. Even more suspicious is they charge fees which appear to be transaction fees. Won't that be fraud? Imagine you buy a stock and the exchange doesn't actually buy it, and charge you trading fee. And if the stock decline and you sell, they make profits of the difference and simply return you the rest. What a good business!
– ycshaoAug 1 '17 at 5:42

The fees they charge are for facilitating the trade. And yes, you are giving them money that they can basically do whatever they want with. It's like banks; your account is essentially a promise that they will send that amount of coins to wherever you request it. When you trade, you are actually trading with the exchange itself or with other people on the exchange. They are just updating internal accounts to credit and debit the correct amounts. They aren't taking your money and going elsewhere to buy Bitcoin, you are actually buying Bitcoin from them.
– Andrew Chow♦Aug 1 '17 at 5:46

I don't think comparing to bank is a good analogy. The nature of it is more like stock exchange, where people trade between USD and stock stock for example. On bitcoin exchange people trade between USD and bitcoin. In a stock exchange, I can request physical form of my trade by requesting the exchange to show me the transaction actually happens. Otherwise I can see it easily become a Ponzi scheme.
– ycshaoAug 1 '17 at 6:01